CESifo GmbH Münchener Gesellschaft zur F&ou : Ifo Business Climate Index Drops Markedly

Ifo Business Climate Germany - Results of the January 2016 Ifo Business Survey

Jan 25, 2016

Sentiment among German businesses weakened at the beginning of the year. The Ifo Business Climate Index for German industry and trade fell to just 107.3 points in January from 108.6 points in December. Assessments of the current business situation were scaled back slightly, but remained very good. Business expectations, by contrast, clouded over significantly. The year started with an unpleasant surprise for the German economy.

In manufacturing the business climate index fell to a 12-month low. Favourable assessments of the current business situation were only scaled back a little, but business expectations were substantially revised downwards. Although the chemicals sector benefited from low oil prices, sentiment weakened in several other branches, including mechanical engineering and the automotive sector, mainly due to the poorer export outlook. Capacity utilisation rates in manufacturing on the whole rose by 0.6 percentage points to 85.1 percent.

In wholesaling the business climate index rose, mainly due to far better assessments of the current situation. Wholesalers' business expectations, by contrast, deteriorated slightly. In retailing the index remained almost unchanged. While retailers were slightly less satisfied with their current situation, their business expectations turned positive.

In construction the business climate index continued to fall markedly, but still remains clearly above its long-term average. The decline was due to more pessimistic expectations on the part of contractors. Assessments of the current business situation, by contrast, reached their highest level in over two years.